Hong Kong successfully launched its Virtual Asset Service Provider (VASP) licensing regime this month. Now, the territory is looking to the next stage in its efforts to become a global crypto hub.
Two areas where Hong Kong is moving ahead at pace include stablecoin regulation and the development of tokenized securities.
VASP Framework Launched to Cheers From Crypto Sector
Hong Kong’s VASP licensing framework came into effect in May. And crypto exchanges that want to operate in the city have begun applying for registration under the new regime.
Leading the pack, Huobi became one of the first major exchanges to announce that it has applied for a VASP license. Gate.io has also applied, while Bitget, ByBit, and OKX have all stated their intention to do so.
Despite being stricter than similar frameworks elsewhere, exchanges have welcomed the new VASP regulations.
OKX Managing Director of Global Institutional, Lennix Lai, said the firm sees “immense potential” in Hong Kong. He added that the new VASP regime has created a “robust regulatory framework and the right conditions for Hong Kong to become a world-leading virtual asset hub.”
With crypto firms embracing the new licensing system, Hong Kong has already attracted a new Huobi headquarters. And as Justin Sun remarked in an interview recently, the exchange expects to be fully licensed and operational in the city within six to 12 months.
As well as being well-received by crypto businesses, the VASP regulation could help drive further investment into Hong Kong’s crypto sector.
In April, the HKMA even issued guidelines prompting banks to support virtual asset service providers. More recently, the regulator reportedly encouraged lenders to meet the needs of crypto firms, emphasizing the need for due diligence procedures not to create an “undue burden.”
Hong Kong Monetary Authority Eyes Stablecoin Regulation
Building on the success of the VASP regime, the Hong Kong Monetary Authority (HKMA) now plans to establish a regulatory framework for stablecoins.
As reported by the local press this week, the HKMA has launched a public consultation to explore new possibilities for stablecoin regulation. The consultation process will draw opinions from academia, crypto businesses, and the general public until Q3 of 2023.
According to the official, Joseph Chan Ho-Lim, the authority hopes to establish new regulations by the end of the year.
Chinese Banks Embrace Tokenized Securities
Another area where Hong Kong is emerging as a leader in the field is in the tokenization of securities. And blockchain-based securities have gained traction with both public and private sector issuers.
For example, earlier this year, the Hong Kong government became the first in the world to issue tokenized green bonds. The $800 million HKD of bonds were issued using Goldman Sachs’ tokenization platform — GS DAP.
More recently, this month, the Bank of China became the first mainland bank to issue tokenized securities in Hong Kong. In partnership with UBS, the bank issued 200 million yuan worth of digital structured notes. These took the form of tokens on the Ethereum blockchain.
According to UBS, the issuance was the first in the region to deploy a public blockchain for such purposes.